Blog

The Bank of Canada has lowered its overnight rate target to 4.75%, with the Bank Rate at 5% and the deposit rate at 4.75%. They are still working on normalizing their balance sheet.

In the first quarter of 2024, the global economy grew by about 3%, matching the Bank's predictions. The U.S. economy grew slower than expected due to weak exports and inventories. In the euro area and China, the economy grew more than anticipated, although China's domestic demand was still weak. Inflation in advanced economies is decreasing, but progress is uneven. Oil prices and financial conditions have remained stable since April.

In Canada, the economy grew by 1.7% in the first quarter of 2024 after stalling late last year, though this was slower than forecasted. Weaker inventory investment affected activity. Consumption grew by about 3%, and business investment and housing activity increased. The job market is still hiring, but at a slower rate than the working-age population growth. Wage pressures are easing gradually, and the economy shows signs of excess supply.

Consumer Price Index (CPI) inflation fell to 2.7% in April. Core inflation measures also slowed, suggesting a continued downward trend. However, shelter prices remain high.

Given the evidence of easing inflation, the Governing Council decided to lower the policy interest rate by 0.25%. Recent data gives confidence that inflation will continue towards the 2% target, though risks remain. The Council is closely monitoring core inflation, demand and supply balance, inflation expectations, wage growth, and corporate pricing. The Bank is committed to restoring price stability for Canadians.